As Amazon headquarters race heats up, concerns about a subsidy war grow

As officials in 20 finalist locations scramble to provide additional data to Amazon.com in their quest to land the company's second headquarters, urban development expert Richard Florida and dozens of his cohorts are urging governors and mayors to join a "Non-Aggression Pact" against offering huge taxpayer subsidies.

Just over a week after Amazon announced finalists, the company began issuing detailed requests for information on workforce, education, transportation, zoning and culture from jurisdictions still in the running, according to officials familiar with the process who spoke on the condition of anonymity because they signed nondisclosure agreements. One official said there were more than 200 questions that would require weeks to answer.

Florida, a University of Toronto professor and author of the best-selling "Rise of the Creative Class" touting the value of high-paying tech jobs, was an early critic of public subsidies for the Amazon project. Now Florida is rallying academics and others to join the cause arguing that governors and mayors should rethink offering billions in taxpayer dollars.

"Initially I thought, wow luring Amazon headquarters could be a good thing," Florida said by phone Wednesday. "Then I said to myself, this is really getting out of hand. This idea of an auction, pitting city against city, is really getting out of hand."

Florida said he admires Amazon as a company and believes some incentives for tech jobs can be a good idea. But he said research suggests that offering big subsidies to large companies rarely drives economic growth, and Florida worries that a new precedent is being set, one in which public officials feel obliged to hand over increasingly larger magnitudes of money to corporations.

Maryland Gov. Larry Hogan, R, has proposed $5 billion in incentives, while New Jersey has offered a reported $7 billion to bring the company to Newark. Other cities and states have yet to make public their bids; they could be offering even more. Hogan called the Amazon project "the single greatest economic development opportunity in a generation," for its potential to bring a Fortune 100 corporate nameplate, high-paying jobs and economic growth to the state.

"The level of incentives that some communities were talking about were overdoing it and not fiscally prudent," Florida said. "Even worse I was worried that the Amazon search was signaling to the environment that megadeals and megadeal competition is the new normal."

Florida penned a petition calling for other experts to "Support a Non-Aggression Pact" for the Amazon headquarters. Leaders from Harvard University, the Brookings Institution and other schools and think tanks, among them former U.S. labor secretary Robert Reich, have signed on. It reads in part:

"Tax giveaways and business location incentives offered by local governments are often wasteful and counterproductive, according to a broad body of research. Such incentives do not alter business location decisions as much as is often claimed, and are less important than more fundamental location factors. Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development."

The letter is addressed to "Elected Officials and Community Leaders" of the finalist cities, not to Amazon founder Jeff Bezos, who also owns The Washington Post. Florida said he hopes the letter gives elected officials some cover to stand up to Amazon and focus on what many of them preach: the need to close yawning gaps in income and inequality in cities such as Boston, Los Angeles, D.C., Chicago and elsewhere.

"These are mayors who say they are so concerned about affordability and inequality, and want to heal their cities, and yet they are part of this bidding war," he said. "W hy can't they stand up and say we want to set some limits and compete on the merits?"

Florida does not absolve Bezos or Amazon of responsibility however, and he thinks what to this point has been a public relations bonanza for the company could end badly if the online Goliath presses for billions of dollars in tax revenue, particularly given existing concerns about the company's size.

"Why would you want to quote-unquote bankrupt a city?" he asked. "It smacks to people as just something that looks bad," he said.

Amazon officials have not commented on the search beyond announcing the list of finalists, saying it evaluated proposals based on the initial criteria. It has not made the subsequent criteria public.

Experts say that realistically Amazon likely needs to be in or around one of the deeper talent pools in the country to fill the 50,000 jobs, which should put locations like Boston, D.C. and New York in a good position to negotiate.

"To me it's just a question of talent, and where executives today feel that they can find it," said Heidi Learner, chief economist for Savills Studley, which offers real estate services to companies across the country. "I don't see that changing in the foreseeable future as long as a tight labor market is at the forefront of decision-making."

Amazon selected finalist locations on either side of the New York-New Jersey state line and three locations in the Washington, D.C., area, which could trigger a subsidy battle among regional rivals. There are two finalists each in Pennsylvania (Philadelphia and Pittsburgh) and Texas (Austin and Dallas). Officials in those states said they weren't focused on the competition so much as making the best case for their cities.

"If Pittsburgh gets it, I'll clap for them and we'll help with whatever the state needs to give them," said Philadelphia Mayor Jim Kenney, D. "Competition is good and it's fine but you can't let it get to where you're denigrating some other city. Pittsburgh's a great city, Boston's a great city, D.C. is a good city. We'll put our best foot forward and if we're successful we'll be grateful, if we're not and we can help somebody else we'll do that."

Georgia is among the states with a finalist, Atlanta, that has not released its subsidy offer. Atlanta Mayor Keisha Lance Bottoms , D, said that doesn't mean the state and city are making a foolish offer.

"Anytime that we try to pursue opportunities to attract businesses, we do a very thorough analysis and there are times that we decide that it's not worth it," she said. "But this is an opportunity that we think is worth it."